FORECLOSURE AND LEASE AGREEMENTS AFTER THE ENACTMENT OF LAW 4/2013 OF JUNE 4

Abstract

In this article the author examines, from a historical and jurisprudential perspective, the effect the existence of a mortgage has on the continued validity of a lease agreed with the mortgagor owner, offering an interpretation of article 13 of the Urban Leases Act (LAU), as amended by Law 4/2013, which combines registration priority with the application of the principle of registration certainty (arts. 32 and 34 of the Mortgage Law (LH)). Thus and by way of example, despite the principle of discharge and cancellation established at article 13, and unless the lease was recorded in the Register before the mortgage, a lease created prior to the mortgage (and subsequently registered or not) may or may not remain in force following foreclosure in accordance with whether the mortgagee and the new buyer acted in good or bad faith. It should however be recalled that the acquisition by the new buyer following foreclosure results from the acquisition of the mortgage by the mortgagee, and as such if the principle of registration certainty operated in favour of the latter, the position of the purchaser has its basis in the prior operation of the principle of registration certainty in favour of the pertinent party.